Xi Jinping heads to Portugal as China’s influence worries EU partners

Chinese President Xi Jinping and his wife, Peng Liyuan disembark from their plane upon their arrival at Tocumen International Airport in Panama City, Panama, 2 December 2018. [Carlos Lemos/EPA/EFE]

Chinese President Xi Jinping arrives in Portugal Tuesday (4 December) for a two-day visit to strengthen ties, amid concern in some EU capitals over China’s growing influence on the continent.

Fresh from a visit to Spain last week, his two-day stay in Portugal will include a meeting with President Marcelo Rebelo de Sousa and the signing of cooperation agreements.

China seeks allies in Spain and Portugal despite EU reservations

China, currently engaged in a trade war with the United States, is seeking to strengthen its ties with Spain and Portugal as other European Union members are trying to restrict Chinese investments.

One of them will bring the Portuguese port of Sines, in the southwest, into what China calls the “new Silk Road”, an initiative that offers loans to build railways, roads and ports across Asia, Europe and Africa.

In an op-ed published Sunday in Portuguese newspapers, President Xi stressed the importance of China’s relationship with Portugal as part of a broader network of trade links.

But China’s growing influence in Europe, welcomed by Greece and several eastern European countries, is viewed warily by others on the continent.

China says 16+1 summits are good for EU

Annual summits between China and central and eastern European countries are beneficial to the European Union as a whole, the Chinese government told Bulgaria’s foreign minister, brushing off concerns that Beijing is seeking to divide the continent.

At the initiative of France and Germany, EU countries last week agreed a framework regulating foreign investment, particularly from China.

With eyes on China, EU agrees investment screening rules

The European Union on Tuesday (20 November) provisionally agreed on rules for a far-reaching system to coordinate scrutiny of foreign investments into Europe, notably from China, to end what a negotiator called “European naivety”.

Portuguese Prime Minister Antonio Costa said Friday that Lisbon did not back the idea and was relieved that the final accord provided for only an advisory role on the part of the European Commission.

Foreign investment does not worry Portugal, and the EU should not “take the
path of protectionism” in the face of globalisation, he said.

Portugal, one of western Europe’s poorest countries, was open to Chinese investment after being hit hard by the 2008 global financial crisis.

Its €78 billion EU-IMF rescue package in 2011 came with required austerity policies — and a wide-ranging privatisation programme that opened the doors to Chinese investment.

Chinese investment accounted for 3.6% of Portugal’s GDP between 2010 and 2016, according to figures from Spain’s ESADE business school.

China now owns a 28% stake in Portuguese energy utility EDP, the country’s largest firm, via China Three Gorges and China’s state-owned international investment company CNIC.

It also has a stake in Portugal’s biggest private bank, BCP, and its leading insurance company, Fidelidade.

Seeking ‘large-scale investment’

Perhaps the most contentious issue is China Three Gorges’ bid to take a controlling stake in EDP, of which it is already the main stakeholder. The operation, launched in May, involves some nine billion euros.

China set to fully control Portugal's power grid amid Europe's inertia

China is set to make further inroads into European infrastructure, as a state-owned company attempts to gain full control of Portugal’s power grid.

But while it has been welcomed by the Portuguese government it still risks running foul of barriers imposed by regulators in around 15 countries where EDP operates — including the United States.

Luis Castro Henriques, head of Portugal’s trade and investment agency AICEP, says Chinese investment in Portugal has been good for the country.

China has risen to Portugal’s 11th-largest trade partner in the decade since 2008, when it was 28th on the list.

“We want now to attract large-scale industrial investment, notably in the automobile and agro-food sectors,” Castro Henriques said.

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